Report criticizes KU for $21M in consulting fees over 5 years; university officials say it produced savings

Topeka  A recent report by a committee made up of faculty, staff and students at the University of Kansas is highly critical of the previous administration’s spending of more than $21 million over a five-year period on consulting fees, including one firm that was paid more than $9 million to find savings and efficiencies on the Lawrence and KU Medical Center campuses.

But in a joint response issued last month, KU Chancellor Douglas Girod and Provost Neeli Bendapudi defended that spending, saying the Chicago-based Huron Consulting Services, which was paid more than $9 million over five years, produced more than $51 million in savings and other benefits for the university.

Among the savings the administration cited were $13.8 million in information technology costs and $10.4 million in purchasing costs through the use of rebates, signing bonuses and contract cost savings. The administration also cited $11 million in new revenue generated by higher first-time, full-time freshman enrollment.

The administration said those savings and new revenues were reinvested throughout the university in things such as new faculty hires, new faculty fellowships, seed research funding and student scholarships and research.

The report by a committee of the University Senate, an advisory group that is part of the university’s internal governance structure, began in 2016 amid concerns expressed by some KU staff about the amount of money that was being paid out to consultants.

“We received quite a number of complaints and remarks by a number of staff members that there were much larger payments than just tens of thousands of dollars,” Ron Barrett-Gonzalez, an aerospace engineering professor and a member of the University Senate, said during a phone interview. “And so we worked through the university governance structure, and with our friends primarily on the staff, to unearth more details.”

According to the report, the Senate’s Planning and Resources Committee sent a request for information about consulting contracts over the previous five fiscal years involving vendors who were paid more than $10,000. That covered a period of time when Jeffrey Vitter, now chancellor at the University of Mississippi, was serving as provost at KU and Bernadette Gray-Little was chancellor.

The initial information they received from the administration listed only about $12 million in consulting fees, including just $212,485 being paid to Huron.

Huron has performed a variety of functions over the years, according to Girod’s and Bendapudi’s response, including helping guide KU’s “Changing for Excellence” initiative, which is aimed at finding administrative savings and efficiencies.

But members of the committee believed that figure was too low, and they requested more detailed information.

Diane Goddard, KU’s vice provost for administration and finance, told the committee that the initial estimate was based on a cursory search of financial records. But after she was asked to go back and do a more thorough search, the report states, she reported back during the spring 2017 semester that the true total was just more than $9.1 million.

The response from Girod and Bendapudi indicated that Huron was paid from a large number of different funds because of the diversity of work it was doing for the university.

Transparency issues

The Senate report also said the committee was stymied in its effort to get more details of the contracts because when it requested copies, it was given heavily redacted ones with much of the information about the scope of work and fees being paid removed.

When members of the committee asked to see all the details of the contracts, the report states, the administration told them they would have to sign nondisclosure agreements first.

“That was one of my main concerns, and I think one of the reasons that the Senate last year wanted this committee to look at that, just to bring it out in the open," English professor Joseph Harrington, who was president of the University Senate, said in a phone interview. “And I think that they’ve done that. The administration, to their credit, did respond to our request. It took a while and it took some adding up of figures, apparently, but they did respond."

A university spokesman did not respond to a request for an interview for this story, but the written response from Girod and Bendapudi provides an explanation of the policy, which some on the committee said they found disturbing and possibly in violation of the Kansas Open Records Act.

“The University does not execute or enter into ‘secret contracts,’” their response stated. “The University does, however, agree to contracts that include express language that prohibits sharing the price/contract amount in any capacity. The Office of General Counsel reviews all contracts to ensure they adhere to state law.”

“We were trying to find the statements of work for a number of these consultants, and we were denied access to the statements of work because they had been wrapped into contracts with the contents that had been redacted and otherwise held secret,” Barrett-Gonzalez said. “And, of course, because we’re essentially an oversight committee, we said, how are we supposed to do our job unless we’re able to see the entire document?”

Barrett-Gonzalez said members of the committee refused to sign the nondisclosure agreements on principle, and out of concern about the legal consequences if they violated such an agreement.

“To this day, there are contracts that are not open to public scrutiny. Even within the university governance structure, they would not allow us to look at them without signing the most egregious agreement,” he said.

Provost Fund Swap account

The report also raises concerns about the level of transparency within the university’s financial accounting system itself.

In particular, it mentions a “Provost Fund Swap” account, which, according to the report, allows the university to take money designated for one purpose, put it into the swap account and then withdraw it and use it for an entirely different purpose.

“While the layperson would use the term ‘money laundering’ to describe what goes on with finances in this account … the account is evidently used to park funds, hold them over from year to year, change their color and even send them outside of the University to vendors or, purportedly, to places like the Endowment Association,” the report states.

“It is clear that the Provost Fund Swap account is historically one of the most useful accounts to the Administration as it has allowed the Administration to effectively shield nontrivial sums from external scrutiny,” the report continued. “It was explained that this is important as Statehouse overseers are constantly looking for reasons to trim the KU budget and the Fund Swap Account allows funds to avoid such scrutiny.”

But Girod and Bendapudi responded, saying there is no such thing as a Provost Fund Swap account at the university, and that funds do not move into and out of such an account.

“’Provost Fund Swap’ is a descriptive term that is occasionally used in budget transfers and journal vouchers,” their response stated. “Budget vouchers and on-line journal vouchers cannot be used to send funds ‘outside the University to vendors or, purportedly, to places like the Endowment Association.’”

Legislative impact

Although the report raises concerns that Kansas lawmakers might react negatively to its findings, the chairman of the House Appropriations Committee said he was actually pleased that KU officials were able to identify so much in savings.

Rep. Troy Waymaster, R-Bunker Hill, said he would like to see other Regents universities do what KU did with its efficiency initiative.

“Last year in the budget bill, we tried to have included in the budget bill that all the Regents schools do that and follow, basically, the precedent that the University of Kansas did,” Waymaster said.

“Well, we watered it down quite a bit because the Senate didn’t want all the Regents schools to do that,” he continued, “so we basically said that (in order) to try to follow what the University of Kansas had done with an efficiency study, we asked that all the schools try to do an internal analysis, or basically an efficiency study on themselves.”

Harrington also said that despite initial concerns, he was pleased to find out the consultants had produced the savings that were reported.

"I have to accept what they gave us at face value," he said. "According to these figures, there actually was quite a bit of money saved, although it does appear that some general funds, which is to say tuition dollars as well as federal funds, went into the payments, as well as state money."

Suzanne Shontz, an associate professor in electrical engineering and computer science who is serving as this year's University Senate president, said the committee is still reviewing the administration's response and has not yet made any recommendations.